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Basic Research

I'm currently reading Rana Foroohar's Makers And Takers, which is an insightful book on the financialization of businesses in the recent decades. It is a vitriolic take on Wall Street and it's harmful effects on innovative businesses that add real value to the world. I'm only half way through the book, but there have already been some interesting takeaways.

One of the issues she focuses on is the decreased spending in R&D by big companies that have a lot of spare cash in their bank accounts, like Apple. She makes the case that the increased pressures on CEO's to keep driving up the stock price forces them to spend this excess cash in financial engineering activities like share buybacks. While these drive up the stock price, they don't add any real value in terms of new innovations or better products or even increased sales. The alternatives for putting this cash to use like increasing the pay of the employees which will result in higher consumption in the economy, or investing in R&D for newer product lines do not result in an increase in the stock price quarter on quarter.

At the same time, we have the likes of Donald Trump cutting funding to basic research and education programs by NASA and other such organizations.

All this is concerning because there is no such thing as a self made man.

Computers, GPS and many such key innovations came about only because there have been governments and companies willing to invest in basic research.

Several successful and highly profitable companies of today that yield great returns quarter on quarter for their stock holders wouldn't have these basics to build their products and businesses on if it weren't for basic research.

We tend to neglect basic research in our own lives too. Be it what job to take after graduating from college, or when to buy a house, or when to startup or when and how to balance out the need to make a living and the desire to do the things we love, we tend to succumb to short-termism just like the CEOs of these big companies succumb to the pressures of Wall Street to show quarter on quarter returns.

When we vote for policies like universal basic income, or universal healthcare or universal education, the impact on GDP growth (quarter on quarter or year on year) might seem concerning, but the damage we do by not voting for these is like the damage companies do by not investing enough in basic research while indulging in financial engineering.